Why so much debt? While some are the result of medical debt and the need to cover living expenses due to a layoff, the majority is due to financing consumers lifestyles. Unfortunately, people tend to live well beyond their means.

They buy out of emotion or wanting to keep up with others. There are still others who suffer from “shiny object syndrome,” and want the newest electronic that comes out as soon as it hits the store shelves.

No matter how you got into to debt, you have made the decision you want to turn that around. That’s great! But, before you sit down and start sending money to your creditors, it is essential you are ready. You need to learn the steps you must follow if you want to be successful.

IS ALL DEBT BAD?

Well, there is no such a thing as “good’ debt. However, if you have taken out a home loan, that debt is not as bad as the other, more toxic type of debt. Credit card, personal loans, and automobile debts are all those you want to avoid. The reason is that you continue to make payment items that lose value, such as your vehicles. You may also be making payments on things you no longer have, such as meals and entertainment.

If you feel the burden of debt, you are not alone. Debt can be soul crushing and make you feel as if you are drowning.

But that is not how it has to be. When you follow these crucial steps for getting out of debt, you get to regain control of your finances. And your life.

THE STEPS TO TAKE TO GET OUT OF DEBT

1. Know your Net Worth

Before you can start the process of getting out of debt, you need to know your Net Worth. Your net worth is the net results of the assets you own less the liabilities you owe. Use our Net Worth Worksheet to calculate your net worth.

For example, if your house is worth $200,000, but you own $150,000, then your net worth would be $50,000. When you do this, you gain clarity and can better understand your real financial well being. It can be the catalyst to jump-start your desire to rid yourself of the bad debt once and for all.

2. Stop adding to your debt

If you are in debt, then you have got to stop adding to it. Right now. That means putting the credit cards on ice (literally freeze them) or cut them up and get rid of them altogether.

Continuing to increase your debt while trying to get out of debt is entirely counterproductive. To dig out from underneath that mountain of debt, you have to stop spending. Period. You can’t afford to add to your debt while trying to pay off your old debt.

3. Start saving

Now, it may seem odd to hear someone say to save money if you are trying to get out of debt, but it is true. For many, the reason you have debt is that you did not have the cash on hand to buy things you needed. For others, it is because there was no money available in the case of an emergency. That has lead to the use of credit to get out of these situations.

To start, do what you can to get at least $1,000 saved. That way, if an emergency comes up while you are on your debt journey (and it always seems something does), you will have the cash on hand to cover it. That prevents you from getting further into debt.

Just remember that if you do have to dip into your emergency fund, you need to build it back up again as quickly as possible. Once you are out of debt, you can then continue to increase the balance of this fund to an even more comfortable level.

There are two ways you can then go about tackling your debt. Pay off the loan with the highest interest rate first, or pay off the one with the lowest balance first. I recommend that you start with the lowest balance.

The reason is that it helps you stay motivated and see progress more rapidly. You will want to pay as much as you can afford towards this debt each month while continuing to make the minimum payment on the others. Continue to chip away at the smallest balance until you get it paid off. Then, take the amount you paid to the now paid off debt and add it to what you pay towards your next lowest balance. Continue until your debts are paid off.

Whichever method works for you, create your plan and stick to it.

5. Find money in your budget

The tough part is finding the money you need. You have to take a good long look at your budget and figure out where you can cut back, so you have more to pay towards your balances.

For many, the areas to look to include dining out, entertainment, subscriptions, etc. Do what you can to eliminate any expenses that are not necessary to living. Anything that you can reduce or eliminate will get you on track to paying off your debt that much quicker.

6. Add more money to your budget

If you’ve already stretched your budget as tightly as it can go, it is time to see where you can find more money. In fact, your budget may be the reason you are in debt.

To help eradicate your debt, you need more money. You can do this by picking up a side job or pick up a side hustle. You may need to sell items you no longer need. If you can increase your income, you will be on track to get your debt paid down much quicker.

8. Realize that this is NOT going to be easy

Your debt did not accumulate overnight. So, it is unrealistic to expect it to go away just as quickly. Paying off your debt is a process that takes time. It may take months, but for many, it will take years. In fact, it took my husband and I a little more than two years to pay off more than $37,000 of debt.

The length of time will vary for every person. You can’t compare yourself to someone else. There are stories where people paid off $100,000 in 9 months, but that is the exception to the rule.

Commit to the change and know it will take time for you to reach your goals.

9. Celebrate the small wins

If you are pushing forward with laser-focused intensity, you will be successful in paying off each debt. However, as you do, take time to celebrate your win. When you know that you get to do something fun to celebrate each small victory, you can be more successful.

It may mean allowing a dinner out or buying a new pair of shoes. There is no right or wrong. Just make sure you don’t go overboard – and always pay for it with cash!

10. Learn from your mistakes

I believe this is the most important lesson of all. You need to understand what lead you down this path to your debt. Then, make a promise to yourself (and your partner) never to allow it to happen again.

Debt and shopping can be a disease. It is addictive, and it can be easy to find yourself making the same mistakes again. Talk to your partner and make sure you are accountable to one another. If you are single, ask a friend to be your accountability partner.

Learn from the mistakes you made and vow never to allow it to happen again.

I'm Tracie! Several years ago, my husband and I found a way to work ourselves out of more than $35,000 in debt. As a result of our journey, we now help families learn to do the same. I share my tips on life, family and finances - to help others achieve this same goal of living a debt free life! Learn more about me and my family HERE.

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